STORE AND PURCHASE MANAGEMENT

TYPES OF STORE

v  Generally unworked material is known as store and the place where it is housed called “Store Room”.

v  Stores are generally of the following categories:

(a)    Raw materials.

(b)   Consumable stores.

(c)    Inflammable stores like petrol, kerosene oil etc.

(d)   Chemicals like carbide, sulphuric acid etc.

(e)    Machinery and Equipment.

(f)    Hand Tools.

(g)   Furniture.

(h)   Finished Products.

(i)     Scrap.

(j)     Unserviceable stores.

(k)   Empties and Packages etc.

v  Finished product ready for sale are called stock and the place where they are kept called “Stock Room”.

 

ORGANISATION OF STORE AND PURCHASE DEPARTMENT

v  In small factories or concerns, the store room and stock room may be one and under the control of one officer but in big organisation both are separate and are separately controlled.

v  The organisation of the store department is as follows: 

v  The store-keeper is very important figure in any organisation and he is as much responsible for the articles in his charge as cashier for the cash.

v  He should, therefore, take steps to reduce thefts and wastage of materials to a minimum.

 

PURPOSE OF STORE KEEPING

v  To see that the stock of no item at any time falls below the prescribed minimum or goes in excess of fixed maximum quantity.

v  To examine carefully all goods and materials on receipt.

v  To arrange for a systematic and efficient storing of materials.

v  To maintain accurate and prompt distribution of items to departments as and when required under Issue Requisition Notes.

v  To maintain efficient quantity records of movement of stock and to account for all goods that has come under their charge.

v  To prevent any theft, wastage or deterioration of stock.

 DUTIES OF STORE KEEPER

v  The first most important duty is to plan the stores. He has some space at his disposal and has to put that space to the maximum use.

v  To keep record of materials and their costs.

v  Whenever requisition are received from shops, they are checked and if found correct, material is issued and entries are made in the required register.

v  He has to check the balance of items from time to time and see that desired quantities are available.

v  Whenever the existing stock at any time is likely to be exhausted he should send its information to store officer, who in turn will inform to purchase section.

v  He has to prevent leakage, theft, wastage and deterioration.

v  He has to see that material is issued only against written requisition.

v  He should not permit everybody to go inside and issued materials must be handed over outside the store, so as to prevent theft and disturbances.

IMPORTANCE OF RECORDS AND REGISTERS IN STORE

v  Mostly stores accounts are referred to the details pertaining to the material which is not for resale.

v  A better stores procedure is a safeguard against waste of material and theft etc.

v  In order to maintain an efficient record of stores, the following books and records will be required and these are maintained separately for different types of materials:

(a) Inward and Outward Registers:- When the material is despatched by the supplier through rail, he will send its receipt issued by the railway authority, called ‘RR’.

ð  On the production of that receipt to railways, material can be received by the customer.

ð  A separate register is maintained by the store-keeper in which daily entries of RR received are made and known as “Inward Register”.

ð  In the same way, when some material goes out of the store to other place, its entries of RR are made by store-keeper in “Outward Register”.

(b)  Stock Register:- These are:

(1)   Dead stock or Non consumable Register:- This is maintained by store-keeper, in which entries of non-consumable articles such as machinery, furniture etc. are made. The different items are entered in different pages. All transactions about a particular item are entered in one page.

(2)   Consumable Register:- In this, store-keeper maintains record of consumable stores received, such as coke, diesel oil, lubricants, cotton waste, paints etc. The different items are entered in different pages. All transactions about a particular item are entered in one page. 

(c)    Daily Receipt Register:- This may be in a register or loose leaf from.

ð  Whenever any material comes in the store, it is entered date wise in daily receipt register.

ð  Material is then inspected ad if found suitable is entered in Stock Register.

ð  If the material is found defective, it will be rejected and either the material or its reports will be sent to the supplier.

ð  The incidental charges that are incurred will also be noted in daily receipt register.

(d)   Issue Register:- This may be in register or loos leaf form. All stores issued are entered date wise in it by store-keeper. From the receipt and issue register, store ledger is prepared by accounts section.

(e)    Surplus Stock Register:- Sometimes such purchases are made, which do not come in use for long time, say (3 years).

ð  Such materials are then declared surplus and are recorded in a separate register called Surplus stock Register.

ð  Thus unnecessary material is removed from the stock register to facilitate easy handling.

(f)    Suspense Register:- The defective items received in excess should not be placed in the bins but in “Suspense cell”. A separate register is maintained by store-keeper for all such items placed in suspense and is known as Suspense Register.

(g)  Condemned Article Register:- Unserviceable material after use or obsolete material which is authorised to be condemned by authorised persons is entered in this register and will be shown as stock until disposed off some way.

ð  The balance of condemned article will be taken out from store ledger and will be shown condemned.

(h)  Loan Register:- Sometimes non-consumable material is issued from store on loan for temporary period by the production of slip of authority.

ð  Before issuing, material is entered in this register and signature of the bearer is taken in this register and slip of authority is kept safe.

ð  When the material comes back, slip is returned and entry of material received back is made in loan register.

(i)    Empty containers and Packages Register:- The record of empty containers and packages is kept in this register by store keeper.

ð  These should be disposed of at convenient intervals by auction or otherwise the best of advantage.

ð  The above are the various records which must be kept by any store-keeper for easy and smooth handling of stores.

ADVANTAGES OF GOOD STORE RECORDING SYSTEM

v  Ready record of all materials and stores purchases may be obtained.

v  As the materials are arranged in a systematic way in racks and bins, handling of stores become very easy.

v  Unnecessary confusion and delay in issue of material avoided.

v  It helps to operate shops efficiently.

v  Overstocking is a avoided and delays due to lack of material prevented.

v  Wastage of time and labour, leakage, thefts and pilfering of stores are reduced to their minimum.

v  Classification of receipts and issues are made easy.

v  Each item issued can be traced to its respective department, so as to ensure correct costing.

v  To safeguard the materials which are lying in store.

IMPORTANCE OF ECONOMIC ORDERING QUANTITY (EOQ) ANALYSIS

v  The evaluation of the most economic quantity to be purchased involves calculation of the following two costs:

(1)   Procurement cost:- This cost includes the expenditure made on:

ð  Calling quotations.

ð  Processing quotations.

ð  Placing purchase orders.

ð  Receiving and inspecting.

ð  Verifying and payment of bills.

ð  Other incidental charges etc.

This cost nearly comes to Rs. 100 to Rs. 200 per order.

(2)   Inventory Carrying Cost:- This consists of expenditure made for:

ð  Insurance.

ð  Storage and handling.

ð  Obsolescence and depreciation.

ð  Deterioration.

ð  Taxes etc.

This cost varies nearly 10 to 20% of the product cost.

v   The economic ordering quantity is obtained by the quantity whose procurement cost is equal to inventory carrying cost.

PRINCIPLES OF SKILLFUL PURCHSING

Following are the main purchasing principle:

1.       Right time: this parameter is most critical one due to the consequences of stock out in the event of part failures.to determine the right time, information about all the element of total lead time should be available, i.e. internal administrative lead time of converting indent into an order, manufacturing and transportation time and inspection lead time.

2.      Right source: following are the main sources for the procurement of spare parts:

a.      Authorised dealers or original manufactures.

b.      Local dealers (Holding genuine spares only).

c.       By getting them manufactured.

While selecting a source of supply for spares; timely supply, reliability, price and service facilities offered should be considered.

3.  Right price: lowest acceptable price consistent with quality, timely supply etc. should be considered.

4.     Right quality: while inviting the tenders or placing the enquiries, quality specifications mentions tolerances should be clearly spelled out.

5.     Right quantity:  the problem of determining the right quantity is interlinked with the right time. The quantity will be different for each category of space such as maintenance, overhaul, and insurance of storable spares.

6.   Right place of delivery/ Transportation: in most of the cases, spare parts has to be supplied directly to the consuming projects, which may be located at far distance places from headquarter. The place of delivery should be clearly mentioned in the supply order.

7.  Right procedure: right procedure to be adopted has to be formally developed for the pre-purchase, ordering, and post purchase systems. Pre-purchase system means initiating the purchase through indents requirement, planning, selection of suppliers, obtaining quotations and evaluating them. With purchase order generally an acknowledgment copy  is also sent to the supplier, who then return it as a written acceptance of supply order and to abide by the terms and conditions mentioned in the order. Post purchase system include follow up with the supplies.

8.   Right contract: purchase order is a legal document that binds selling company with the buying company various terms and condition about insurances, sales tax, octrai, customs, breach of contract, settlement of dispute, F.B.O., C.I.F., etc. should be clearly mentioned

DUTIES OF PURCHASE OFFICERS

v  The most important and essential duties of purchasing officer are:

ð  To maintain the standard of quality of product by selecting right quality of materials during purchases.

ð  To organise and direct the purchasing department for efficient working.

ð  To represent his concern with other concerns during purchasing contacts.

ð  He should maintain the reputation of the concern for integrity and fair dealing with others while negotiating.

ð  Shops should not wait for materials.

ð  To make a final check on all the requisitioned goods from different shops in the interest of economy, as regards quality, quantity and specifications.

ð  To act as an executive of the firm and a partner, especially in the preparation of purchasing budget.

ð  To spend money on purchases very carefully and wisely.

ð  To suggest if the materials can economically be produced in the concern instead of purchasing and vice-versa.  

SALES MANAGEMENT AND MARKETING

 ORGANISATION OF SALES DEPARTMENT

v  The effectiveness of the sales organisation is a most important factor in the progress of a firm, because the final figures of profit ultimately depend on the efficiency of this department.

v  The whole operation of an industrial concern depends upon ability of the sales department to obtain orders for the sale of its products, and dispose of them immediately as they are manufactured, so that there should be least problem of stocking or blocking and it will also affect the cost of product.

v  Depending upon the size of factory, the organisation of the sales department is made.

v  For large size factory, this works as a separate department but for medium and small size factory, it works with the cost of department.

v  The functions of sales department for a large scale factory are shown below: 

ORGANISATION OF MARKETING

v  The actual organisation of the sales department is largely determined by function, area, product group and customer category and end-user category.

(1) Functional Organisation:- The functional organisation is usual for the small or medium sized company with a limited range of related products.

v  The functional organisation has various functional departments or specialists reporting to a sales or a marketing director.

v  It has the advantage of administrative simplicity, but it suffers from certain disadvantages such as

(a)    Inadequate detailed planning for specific products and markets, since nobody is assigned full responsibility for any product or market.

(b)   Products that are not favourites with various functional specialists tend to get neglected.

(2)  Area based Organisation:- 

v  The area based organisation is one of the more common one in use for concerns with a relatively limited range of products requiring selling and distribution to be on a more or less nationwide scale through many outlets.

(3) Product Group Organisation:- 

This type of sales organisation is employed when there is a wide range of relatively unrelated product groups which require different selling methods and the company sales forces require their own particular market and technical knowledge.

(4) End use and customer class sales organisation:-

v  If an enterprise is selling a substantial range of products to dissimilar types of customers or for different uses, the selling operations are split up by type of customer or end use.

v  Here separate sales forces are necessary. However, marketing services may either be kept centralised or again split up as per the particular division of the selling operations.

v  Fig. (1) shows the end use sales organisation and Fig. (2) the customers class sales organisation.

 

MARKETING FUNCTIONS

ð  Marketing is the basic function of a business unit. Its organisation is therefore highly developed and in most cases highly sophisticated.

ð  The sales department is usually under the charge of a sales manager who is directly under the general manager under him is the assistant sales manager who is in charge of either a product or an area or both assistant sales managers have been them the salesmen at the spot.

ð  The sales manager is the top marketing officer. The duties of sales manager as under:-

(a)    He must try to keep maximum sales efficiency at maximum disposal of products.

(b)   He must always be on the lookout for new and profitable markets.

(c)    He must always try to improve sales methods.

(d)   Where the sales are affected through retailers, he should receive the suggestions and provide them every possible help in the extension of sales.

(e)    He must exercise his full efforts to ensure that the goods reach the customers by the most economical route.

(f)    With the view to obtain collective efficiency from his staff, he must inspire a spirit of friendliness amongst the members.

(g)   He must keep in touch with the essential requirements in order that necessary supplies may be made available at the time, they are wanted.

(h)  He must keep constant watch towards comparative study of the competitor products, their marketing efforts, packing methods and modes of transport. These will provide most valuable information as to how to meet competition.

(i)     He must inspire complete co-ordination between the advertising and sales policies.

(j)    He must always encourage and welcome suggestion from sales force as also the dealers, in regards to the quality, appearance, price or methods of packing and despatch of products. 

 

FUNCTIONS OF SALES DEPARTMENT

v  The various functions of sales department are:-

(1)   Market Research:- It means study of market, which includes forecasting, intelligence and statistics. It is an important factor for the sale of products.

ð  Failure to do this accurately may lead to the production of more goods that the market can absorb.

ð  This may mean financial losses to the firm. It may also lead to under production, the results of which are equally unpleasant.

(2)   Advertising:- It is the publication of information regarding products put up for sales and is a method to bring the producer into touch with customers.

ð  This informs the customers about the product and the place from where they can get it

ð  It promotes trade and creates demand and hence it is the pivot of modern trade commerce and business.

(3)   Sales:- All the activities of the sales department are for selling to earn maximum profit. For this purpose continuous search is made for profitable markets.

ð  Various agencies are opened throughout the country and if possible in foreign markets

(4)   Sales Correspondence:- Any incoming letter must be replied in a short time. The letter should be tactful, simple in language, helpful and every customer must feel that his enquiries are being considered.

ð  Quotation for the supply of products should be sent to large number of customers and try to capture large markets.

ð  If the promises cannot be kept with regards to delivery date or other matters the customers should be informed immediately and whenever practicable reasons for the delay should be given.

(5)   Service:- Industry is rapidly adopting the principle that service is an essential part of the sales itself. Manufacturers often find it essential to see that their products are properly installed.

ð  This is not only a service to the customers but also a protection against complaints and general dissatisfaction of the customers.

ð  The manufacturers, therefore, maintain a staff of skilled engineers and mechanics, which carry out tests at the customer works, give technical help and advice and see that everything is functioning properly.

(6)   Packing:- Packing to be used for products depends upon the type of product to be packed. Following are the few types of packing of industrial products:

·         Paper wrapper

·         Tin container

·         Cloth packing

·         Card board packets

·         Plywood boxes

·         Plastic packing

·         Wooden packing

ð  With the help of good packing, the products can reach to the customer in same form and quality as they were before despatch.

ð  Good packing also helps in advertising and attracts more number of customers.

(7)   Warehouse:-These are the godowns, for storing finished products after they are packed in s systematic manner.

ð  These are built in such a way that materials can be kept in them for a period till they sold. For easy transportation, these generally situated near the factory main gate.

 

IMPORTANCE, ADVANTAGES AND ECONOMIC IMPLICATION OF ADVERTISING

ð  The most appealing definition of advertising is –“advertising bring to the greater number of people, actual knowledge concerning useful things, thus it essentially a form of education of the people about the product.”

Function of Advertising

ð  Following are the main important functions of advertising:

(1)   Advertising is the powerful media of demand creation by reaching to the customers and telling them about good qualities of the product.

(2)   To prepare ground for a new product by way of introducing its product to the public.

(3)   It enhances the goodwill of the company among customers.

(4)   Advertising helps the product to stand against its competitor products.

Advantages of Advertising

(1)   To Manufacturers

ð  It increases sales by way of increasing demand.

ð  Helps salesmen by preparing ground for them.

ð  Creates good will by telling customers about the quality and service.

ð  Lower costs can be achieved by way of increasing the turnover due to advertising.

(2)   To Customers

ð  Facility in purchasing a product is felt by the consumer because he can decide that what he should purchase.

ð  Better quality is available to the customers.

ð  Because of the direct contact between manufacturer and the customer, middlemen cannot charge more profit.

(3)   To Society

ð  Advertisements help the newspapers in keeping their rates low, so that the newspapers are well within the reach of common men.

ð  These, by way of increasing the production, raise standards of living.

ð  Provides employment, encourage artists etc.

ð  To remain in the market and to advertise specialities of the product, manufacturer has to pay attention on research so as to get new improved and better products.

Economic Implications of advertising

ð  Advertising has following main economic implication:

(a)    Informing Consumers:- An advertisement informs the consumer about the market condition, namely, the goods available in the market, their characteristics, the model best studied to the needs of the consumer and so on.

(b)   Broadening the Market:- Advertising broadens the market by familiarising the consumer with new products, increasing the number of dealers. All these tend to increase the production and hence lower the cost due to mass production. Advertising reduces the scope for earning local monopoly profits.

(c)  Lowering Selling costs:- Its main advantage is to lower the cost per contact. e.g. one newspaper advertisement places the product before the eyes of many more prospective buyers that the equivalent expenditure on salesmen. Thus efforts for retail sales are reduced, which reduces per unit expenditure on sales.

(d) Encouraging Competition:- With the help of advertising new firms can introduce their products, more rapidly than would be possible without advertising.

(e) Criticism:- Advertisement has been criticized for (1) misinforming the consumers (2) concentrating the market in the hands of few, who can invest heavily on the advertisements, this creates problems in establishing new business with limited resources, even if the product is good.

 

 ADVERTISING MEDIA

ð  Large number of advertising media are available to the advertiser, but following are the basic and commonly used advertising media:

(a)    Newspapers:- With this media, message can be conveyed to people through large circulation, economically, at a repetitive frequency.

(b)   Magazines:- Advertisements can be given through specialised periodical magazines. Articles giving detailed speciality about the product can be given in the trade and technical journals. The articles related to fashion and house use can be advertised through and fashion magazines which are read by ladies.

(c)    Radio.

(d)   Television.

(e)    Catalogue and descriptive leaflets and samples.

(f)    Exhibits and displays.

(g)   Slides in cinemas.

(h)   Goodwill gifts like pencils, calenders, shopping bags, pen-stands etc. bearing names of the company and its products.

(i)     Prize contest.

(j)     Discounts.

(k)   Direct mail:- with this method message is conveyed directly to the persons, for whom it is meant, rather than spending lakhs of rupees in advertisements through press. This message is conveyed secretly from competitors.

 

SALES PROMOTION

ð  All the activities that go into the development of sales or these that are intended to raise the demand level for a product very quickly can be grouped under the title sales promotion.

ð  It includes those marketing activities, other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibitions, demonstration and various non-recurrent selling efforts not in the ordinary routine.

ð  It focuses the attention of the customers at the actual point of sales in the shops with such effectiveness that both the advertiser and the dealer are benefited. The main purpose is to increase sales.

ð  It plays a critical role in introductory and maturity stages of the product life cycle and also appears to be especially effective during periods of rapid inflation.

ð  Sales promotion, intended to educate the consumers better and to bring about an increase in sales is used more extensively in highly competitive business.

ð  The whole idea behind sales promotion is to bring the name of product and that of the manufacturer constantly before wholesalers, retailers and consumers in order to stimulate their interest in the product.

ð  Function of sales promotion department:-

(1)   Product package detailing

(2)   Service to salesmen

(3)   Service to dealers

(4)   Making displays

(5)   Helping the dealers in demonstrations, door to door conversing etc.

      (6) Publicity